Osborne to launch spending audit

George Osborne is to launch an independent audit of Government spending

Chancellor George Osborne will launch an independent audit of Government spending after ministers claimed they had found "black holes" in the budgets left behind by the outgoing Labour administration.

The review, to be conducted by the new Office of Budget Responsibility under Sir Alan Budd, comes ahead of an emergency Budget planned by Mr Osborne for the end of June and a wide-ranging spending review to be conducted over the summer.

Prime Minister David Cameron said that incoming ministers had found signs of "crazy" spending decisions taken by Labour ministers in the final months before they lost power.

And universities minister David Willetts said Labour had left behind "not so much an in-tray as a minefield".

In a BBC interview on Sunday, Mr Cameron declined to rule out a hike in VAT to 20% in the upcoming Budget, but said: "That is not something we plan to do."

He signalled plans to reform capital gains tax so different rates are applied to non-productive investments like second homes and investments in businesses.

Mr Cameron said talks are still under way with Liberal Democrats on Tory plans to remove tax credits from families earning more than £50,000.

And he announced an immediate clampdown on bonuses for senior civil servants, which he said would save £15 million annually.

Reports on Sunday suggested that ministers are concerned about commitments entered into by their Labour predecessors including a £13 billion defence contract for tanker aircraft; some £240 million of school building contracts signed off weeks before the General Election; a "crisis" in the student loans company; a failure to account for the multibillion-pound cost of decommissioning nuclear power plants; and a £600 million computer contract for the new personal pensions scheme.

Business Secretary Vince Cable told the Sunday Times: "I fear that a lot of bad news about the public finances has been hidden and stored up for the new government. The skeletons are starting to fall out of the cupboard."